Bank of China (601988:SSE) written Q&A, November 3, 2023 transcript

Distinguished guests, investors, and online viewers, hello! Welcome to BANK OF CHINA’s 2023 Third Quarter Results Briefing. This event is hosted by BANK OF CHINA, with online platform support provided by SSE Info Network Co., Ltd. Thank you for your attention and participation. On October 31, BANK OF CHINA published its 2023 Third Quarter Report. Investors may visit the Shanghai Stock Exchange website (http://www.sse.com.cn/) or this platform (http://roadshow.sseinfo.com/) to view the relevant announcements.

To help investors gain a more comprehensive and in-depth understanding of the company’s operating results and financial position for the third quarter of 2023, the company has decided to hold BANK OF CHINA’s 2023 Third Quarter Results Briefing. At today’s event, key members of BANK OF CHINA’s management are joining us at the SSE Roadshow Center to communicate and interact with investors. We welcome everyone’s active participation.

First, we invite the listed company’s guest to deliver the opening remarks.

Dear investors, Hello! Welcome to BANK OF CHINA’s 2023 Third Quarter Results Briefing. Thank you for your longstanding attention to and support for the Bank of China, and also for the strong support of the Shanghai Stock Exchange and the Roadshow Center! We hope that today’s presentation and discussion will help you understand BANK OF CHINA better and feel more confident. Since the beginning of this year, BANK OF CHINA has earnestly implemented the decisions and arrangements of the Party Central Committee and the State Council.

Focusing on high-quality development as its primary task, and adhering to the principle of pursuing progress while maintaining stability and consolidating stability through progress, we have coordinated efforts to serve the real economy, deepen financial reform, and prevent and control financial risks. Assets and liabilities have grown steadily, operating results have remained stable, and risk quality has been prudent and steady. Our bank has published its 2023 Third Quarter Report on the Shanghai Stock Exchange website and our official website, where you can download and view it.

Thank you!

This year marks the tenth anniversary of the Belt and Road Initiative, and the Bank of China has clear advantages in overseas business. Could you tell us about your bank’s recent presence in countries along the Belt and Road? How competitive is your cross-border business in the market?

Dear investor, hello. Our distinctive global presence and advantages continue to be strengthened. The Islamabad Branch and Riyadh Branch have opened in succession, supporting high-quality development of the Belt and Road Initiative. As of the end of September, we had branches and offices in 64 countries and regions overseas, providing customers with comprehensive financial services worldwide. The operating results of our overseas institutions have grown well, and their contribution to Group profits has continued to increase.

We have continued to deepen our presence in the Hong Kong and Macao markets and Southeast Asia, with steady growth in the deposit and loan balances of Bank of China (Hong Kong). Our cross-border businesses, including international trade settlement, cross-border RMB settlement, Panda bonds, offshore bonds issued by Chinese enterprises, and Cross-boundary Wealth Management Connect, have maintained the largest market share. We have also maintained the largest market share in the foreign exchange settlement and sales market. Cross-border e-commerce settlement business volume increased by approximately 130% year on year.

We successfully launched Swap Connect and, as one of the first onshore quoting dealers, have provided quotation services to overseas investors.

Hello, I have held shares in the Bank of China for some time and am quite concerned about your profitability. How were the Bank of China’s results in the third quarter?

Dear investors, hello. Since the beginning of this year, our Bank's financial performance has remained stable. The Group achieved operating revenue of 470.9 billion yuan, up 7.10% year on year. Net interest income and net fee income both grew. Profit after tax was 186.5 billion yuan, up 3.55% year on year. Major indicators remained within a reasonable range. Net interest margin was 1.64%, down 11 basis points from the full year of the previous year. Return on average assets (ROA) was 0.82%, and return on equity (ROE) was 10.37%.

The cost-to-income ratio (under the regulatory measure for mainland China) was 26.98%, down 0.02 percentage points year on year. Thank you for your attention.

May I ask management how the credit extension plan for this year is progressing? Which areas are the key focus?

Dear investors, hello. The status of our Bank's credit extension in the third quarter of 2023 is as follows: First, in supporting major national regional strategies, loans in key regions such as Beijing-Tianjin-Hebei, the Yangtze River Delta, and the Guangdong-Hong Kong-Macao Greater Bay Area increased significantly. We upheld the principle of “two unwavering commitments.”

Second, regarding loans to private enterprises, loans to private enterprises increased by 687.7 billion yuan from the beginning of the year, 241.5 billion yuan more than the year-earlier increase, representing growth of 23.48%. Their balance accounted for 32.90% of corporate loans.

Third, we supported the development of key national science and technology innovation fields. Loans to strategic emerging industries increased by 677.8 billion yuan from the beginning of the year, up 60.4%. Credit facilities for national-level “Little Giant” enterprises and provincial-level “specialized, refined, distinctive and innovative” enterprises totaled 266.2 billion yuan, serving more than 15,000 borrowers, with a credit coverage rate of 21.54%, an increase of nearly 2 percentage points from the beginning of the year.

Fourth, we promoted the expansion of inclusive finance. The balance of inclusive loans to micro and small enterprises was 1.67 trillion yuan, an increase of 437.5 billion yuan from the beginning of the year, up 35.62%. The number of loan customers increased by 224,000, up 29.94%. Thank you for your attention.

May I ask management about the recovery in retail consumer business in the third quarter, including consumer loans and mortgages? Have all the adjustments to the interest rates on existing mortgages been completed?

Dear investors, hello. Our Bank has actively promoted consumption and expanded domestic demand. Personal consumer loans increased by 45 billion yuan from the beginning of the year, up 29.0%. We have advanced the stable and healthy development of the real estate market. The balance of real estate development loans was 670.627 billion yuan, an increase of 55.709 billion yuan from the end of the previous year, up 9.06%. We have carefully carried out the adjustment of interest rates on existing home loans, and adjustments have been completed for all 5.5 million eligible first-home loans.

Will the Bank of China increase its dividend payout ratio or the number of dividend payments?

Dear investors, hello. Since its listing, BANK OF CHINA has consistently been committed to creating the greatest value returns for shareholders, maintaining a relatively high cash dividend payout ratio of over 30%. As of 2023, BANK OF CHINA had distributed a total of more than 800 billion yuan in cash dividends to A-share and H-share shareholders, far exceeding the amounts raised through its IPO and post-listing equity refinancing, placing it among the leading listed companies in China. We fully understand and attach great importance to shareholders' expectations for cash dividends.

During the 14th Five-Year Plan period, BANK OF CHINA will continue to promote healthy business development and steady improvement in performance, and strive to deliver better operating results for shareholders. At the same time, taking comprehensive account of factors including shareholders' expectations for returns, business development needs, and regulatory requirements, we will formulate our dividend plan on a sound basis and fully protect shareholders' right to returns. Thank you for your attention.

May I ask management what green and low-carbon financial products your bank supports, and how your investment and financing activities rank in the market?

Dear investors, hello. Our Bank has closely followed national strategies and vigorously supported green and low-carbon development. The balance of domestic green loans was 2.89 trillion yuan, up 45.19%. The underwriting scale of green bonds was 286.207 billion yuan, ranking first in the interbank bond market. The balance of investments in renminbi green bonds was 129.67 billion yuan, an increase of 18.1 billion yuan. Thank you for your attention.

Thank you all for participating in today’s results briefing. If you have any further questions to discuss, please contact our bank’s Board Office. Once again, thank you for your concern and support for BANK OF CHINA!

Investors and online viewers, BANK OF CHINA’s 2023 Third Quarter Results Briefing is drawing to a close. We invite the listed company’s guest to deliver the concluding remarks.

BANK OF CHINA’s 2023 Third Quarter Results Briefing has now come to a successful conclusion. Thank you to all investors and online viewers for your active participation. If you have any further questions, you can stay in touch with the company through the SSE e-Interaction platform. Thank you!